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"I would not give a fig for the simplicity on this side of complexity, but I would give my life for the simplicity on the other side of complexity." —Oliver Wendell Holmes

When it comes to managing their costs most companies operate with a simple model. They start by trying to maximize their gross margins so that they have a high cushion for spending in areas where they feel they need to spend heavily in order to compete, such as advertising and promotions. But a growing number of high-performing companies are showing that there is a better way to manage spending and improve performance. These companies live and operate on the other side of complexity.

Over the past several years, we have studied a group of companies that defy conventional wisdom and at first glance seem to perform financial alchemy. These companies pay their rank-and-file employees much better than their peers, have suppliers who are profitable, invest heavily in their communities, pay taxes at a higher rate, provide terrific customer service, invest in making their operations more environmentally sustainable and do not externalize costs onto society. With all this spending, it would seem that there would...

Trust is an essential human attribute and virtue. When we are born, we are completely helpless and at the mercy of others. We instinctively trust that someone will look after us, nurture us, protect us. Being trusting and being trustworthy are central tenets of what it means to be a human being.

Yet, there is a huge trust deficit in our society today. There is a crisis of trust in government, in religious institutions, in our educational system, in the health-care system and in the financial system. There is deep distrust within the public at large towards the corporate world in general and towards most companies and their leaders. Within companies, there is a great deal of mutual distrust among employees, and among employees and customers, suppliers and leaders.

Why should all of this matter? Trust is an essential element in building social capital, which Francis Fukuyama defined as the “shared norms or values that promote social cooperation, instantiated in actual social relationships.” Unlike other forms of capital, social capital is not depleted by being used; in fact, it is depleted if not used. Social capital is vital for the development of society as a whole as well...